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Financial Planning and Your Divorce

Divorce is not one of the happy milestones in life, but, unfortunately, it does happen. If you are dealing with the end of a marriage, consider these issues to protect yourself from major financial obstacles and liabilities.

Retirement planning
Look into your IRAs and pension plans to see whether you will have sufficient funds to retire. Change your beneficiary designations. If you transfer your interest in an IRA to your ex, make sure it is done correctly to avoid extra taxes and penalties.

Estate planning
Amend your will to remove your former spouse as a beneficiary. Establish trusts for your children to prevent your ex or his or her new spouse from controlling the assets you want to leave to your children.

Insurance planning
Shore up your life insurance, health insurance, and long term care coverage. Purchase new, additional, or COBRA coverage for yourself and any dependents. Update your designated beneficiaries on your life insurance policies.

Property issues
If you end up with the marital home, you will need to get the deed re-titled. But a big concern is whether you should keep the house at all. Taxes and maintenance can be prohibitive. Selling the home, although hard, can provide you with an emotional clean slate, as well as an investable nest egg and a cushion to pay expenses.

Standard of living
Your income may decline significantly with the lack of a second salary, or if you are responsible for alimony or child support. Take a long, hard look at your spending habits and expenses, and be prepared to live on a budget.

College planning for children
Establish a way to ensure that the funds for college are maintained and that they provide sufficient monies for room, books and board.

Joint liabilities
Know the extent of your joint marital credit and liabilities and separate yourself from them as soon as possible. Get your credit report as early as you can. Establish your own credit and bank accounts. Three months after your divorce is finalized, check your credit report again to make sure you’re not still financially attached.

Carefully consider all of your options. Never act in haste or emotionally, and never sign any legal document unless you know exactly what it means. You may find it helpful to have an outside financial professional who can look at the situation objectively to help with your decision-making.